“We do a lot of business with state and local governments,” said Mr. Reeder in an interview with CFO Journal, adding that many of those customers might not look kindly on a company that relocated offshore.

Lexmark also considered bringing back its overseas cash to the U.S., paying tax on that money and using it to buy back shares, Mr. Reeder said.

In the end, the company decided it would be best served by simply using the cash pile to buy Kofax, and move further into the software business, an area it wants to expand.

Many U.S. companies have moved overseas to lower tax jurisdictions to reduce their tax payments. These so-called tax inversions were the hottest trend in M&A last year, until the U.S. Treasury Department tightened rules to deter U.S. companies from moving their headquarters offshore.

While regulators’ more aggressive stance against the deals has cooled the inversion trend, Mr. Reeder wouldn’t say whether it played a role in Lexmark’s thinking. He noted only that it had little left to protect from the Internal Revenue Service, once the company found Bermuda-based Kofax as a target and decided to use the bulk of its roughly $780 million in foreign earnings on the transaction.

Lexmark will fund the Kofax deal with $700 million of foreign cash, and by borrowing $300 million from its line of credit, he added.

Lexmark has been building its software and imaging business and shifting its focus from consumer printing. It exited the inkjet printing business in 2013.

The Kofax deal, announced on March 24, is expected to close around May 21, according to a regulatory filing. Shareholders for the company will vote on the deal on May 18.